CO-OPERATIVE DEVELOPMENT AGENCY BILL

HC Deb 06 April 1978 vol 947 cc748-808

Order for Second Reading read.

8.27 p.m.

The Under-Secretary of State for Industry (Mr. Bob Cryer)

I beg to move, That the Bill be now read a Second time.

I want, first, to say something about the background to this short but very important Bill, which is highly relevant to our national situation. I shall then go on to describe in more detail what it contains and what we are seeking to achieve by placing, the Bill before the House.

The co-operative movement has long been with us and has a proud history based on solid achievement. It began in the nineteenth century as an alternative form of endeavour to the exploitation of capitalism, which had many unacceptable faces in the nineteenth century. Robert Owen initiated many co-operative endeavours, but it was George Holyoake who persuaded the Rochdale Pioneers to establish the first co-operative shop, which was opened in Toad Lane, Rochdale, in 1844 when the Rochdale Society of Equitable Pioneers was first registered. The founders of the Pioneers gave birth to ideas which proved an inspiration to those who came after. From these small beginnings a world-wide movement has developed. The co-operative principles are generally recognised as an important concept which gives the contemporary movement its characteristic form.

Paragraph 6 on page 2 of the White Paper sets out the principles of co-operation extremely well. It says: Essential to co-operative philosophy is the idea of equal partners working together for the common good and, although there are significant differences of constitution and style among the various organisations within the Co-operative Movement, they share certain basic values and principles. The first co-operatives had as their objective the creation of a just and fairer society. The welfare of and service to the community of members rather than the pursuit of profit for distribution to investors of capital remains the prime motivation of Co-operation. In a co-operative or common ownership enterprise the reward of working together, in production, distribution and service activities accrues directly to the members actually creating the prosperity of the enterprise. Earned surplus, or savings, is applied to their collective benefit or democratically distributed to them in the form of dividend. The range of co-operative activities is very large. Some sectors of co-operation have prospered; others have declined. The overall picture is one of successful achievement, but inevitably it is one of fluctuating fortunes rather than steady inexorable improvement. There are more than 200 retail consumer societies in membership of the Co-operative Union, with a combined membership of some 10½ million. Its annual turnover represents over 7 per cent. of the total national retail trade. The Co-operative Wholesale Society is the central organisation set up by the retail societies to buy collectively on their behalf, engage in manufacturing and provide technical and advisory services for them. The CWS had a 1976 turnover of more than £1,266 million. The Co-operative Bank and Co-operative Insurance Society are wholly owned subsidiaries of the CWS. These are large and successful organisations operating under the inspiration of the co-operative principles.

As the Labour Party said in "Labour's Programme 1973", Labour's commitment to public ownership does not mean a rigid adherence to the 1940's form of nationalisation. The best examples of our wider view is the Co-operative Movement where 11 million people join together to operate a huge sector in the British economy which has a vast potential for further development. Closer to my departmental interest there are two relatively small organisations representing co-operation in the industrial field. First there is the Co-operative Productive Federation, which is the trade association for traditional producer co-operatives. Of the 20 or so societies still operating in this country, about eight are in membership of the CPF. Secondly, there is the more recently formed Industrial Common Ownership Movement inspired by the very successful Scott Bader Commonwealth at Wollaston, in which about 400 co-operators are involved. My Department is supporting the work of ICOM by means of grants under the Industrial Common Ownership Act 1976, which, hon. Members will recall, was a Private Member's Bill promoted by my hon. Friend the Member for Consett (Mr. Watkins).

In agriculture, the Central Council for Agricultural and Horticultural Co-operation was set up in 1967 as a statutory body to encourage and promote co-operation in production and marketing in that sector and to act as agents of the Government in administering a grant scheme. Over 400 agricultural co-operative societies in Britain belong to the Federation of Agricultural Co-operatives (UK) Limited. Other central organisations represent the interests of co-operation in the fishing industry, housing and credit unions.

Certainly, there are already a number of representative organisations in the various co-operative sectors. But over a period of years—a decade and more—the need has been felt for a new agency within the co-operative movement; the need for a body to keep a general watch over the whole range of co-operative activities, to provide support and to co-ordinate a co-operative viewpoint. This need was eloquently expressed within the Co-operative Party and discussed at successive co-operative congresses. All this led to the call for the Government to establish a Co-operative Development Agency.

In March 1977, my right hon. Friend the Minister of State, Department of Industry, chaired the first meeting of a working group set up to develop further the idea of a Co-operative Development Agency as a body to give advice and guidance to co-operatives of whatever kind and as one which would be able to speak for the co-operative movement as a whole. My right hon. Friend is prevented from being here tonight owing to his being abroad on Government business in the Far East. I know that he would want me to pay tribute to the members of the working group, who came from many sectors of co-operative activity and from Government Departments interested in aspects of co-operation, for the way they set about their task so that their report was able to be published in October, some seven months after their first meeting.

The report did not contain a unanimous recommendation, although there was a good measure of agreement among the co-operative movement representatives on the working group. It is, perhaps, not entirely surprising that there should be two views on some of the detailed recomendations. These were published side by side in the report and both were very carefully considered by the Government. The Bill seeks to implement the recommendations embodied in the majority report.

It was certainly a useful endeavour to involve co-operators in the formulation of the White Paper. While there was broad agreement, the minority report shows a slightly different emphasis and demonstrates that differing views can be registered, a point which could perhaps be usefully noted by several hon. Members who appear to have studiously avoided such a concept in recent Select Committee reports.

Mr. Mike Thomas (Newcastle-upon-Tyne, East)

rose—

Mr. Cryer

I shall give way to my hon. Friend at the end of these few sentences. The crucial point of difference between the majority and minority points of view concerned the method of appointing the members of the Agency. The minority report by tour members of the working group from some of the smaller, relatively recently founded and less-developed sectors of co-operative activity—housing, credit unions and common ownership—proposed that not less than one-half of the members should be appointed by participating co-operative organisations on an equal basis whereby each organisation, regardless of size, would appoint one member.

All the larger, longer-established co-operative organisations objected to the proposal on the grounds that it ignored the disparities of size between them and would require too large and unwieldy a membership of the Agency. The majority report also had the support of some of the organisations representing the less-developed sectors of activity—producer co-operatives, credit unions, agricultural co-operatives and fisheries co-operatives—and of the member from USDAW, representing the trade union viewpoint.

After very careful consideration, the Government decided to accept the majority recommendation that the power to make appointments to the agency should vest in the Secretary of State, who should be required to consult and seek nominations from all classes of co-operative organisation. This will ensure as far as possible that the governing board of the Agency comprehends the whole range of the movement's interests.

Mr. Mike Thomas

I am grateful to my hon. Friend for giving way, and I hope that he will forgive me for intervening. As he has gratuitously introduced into this matter the question of Select Committees, perhaps he will explain why my right hon. Friend the Secretary of State has accepted the report which every one of the Labour members of the Select Committee on Nationalised Industries accepted and signed, not as some shabby compromise but as the view they took. My right hon. Friend has now introduced a policy exactly based on that report, with two exceptions. One concerns the iron-making facility at Scunthorpe and the other the whole question of the Port Talbot expansion, which we recommended we should go ahead with. Why does not my hon. Friend feel that a night like this, when we are discussing co-operative matters, is an opportunity to raise the whole question?

Mr. Cryer

My hon. Friend shows a great deal of sensitivity on these matters. I was simply pointing out that in a report which we have published, and for which we are grateful to all the participants it was possible for a minority view to be extended. All that I was saying was that in recent weeks a point of view had been expressed that unanimous reports were universally desirable. I am merely making the point that here we have a report which shows a divergence of view. In my estimation, that does not diminish the report but may improve and strengthen it.

Mr. Thomas

We do not want to labour this, but what is the purpose of having a minority report when everyone is agreed and there is no minority view?

Mr. Cryer

As my hon. Friend says, we do not want to labour this point, and I know that we want to make progress.

I have spoken so far, and at some length, of what led up to the drafting of the Bill, which sets the measure in context. I turn now to the Bill itself.

The object of the Bill is to establish a Co-operative Development Agency. Clause 1 provides for the Agency to be established as a corporate body to perform the functions specified in Clause 2. The clause provides that the Agency will have a chairman and other members—between a minimum of four and a maximum of eight—who will be appointed by the Secretary of State. Before making such appointments, the Secretary of State must consult persons appearing to him to represent the interests of the co-operative movement. This follows the working group's recommendation that he should consult and seek nominations from all classes of co-operative organisation. I should point out that there is no requirement to appoint only people thus nominated.

As paragraph 37 of the working group's report pointed out, the choice of chairman will be of special importance. He or she must be acceptable to the movement as a whole, command its confidence and be capable of engaging the attention of Ministers and their Departments. The report goes on to suggest that it might be desirable if the chairman were someone who had no direct responsibilities towards any particular section of the movement, so that the Agency, in its formative years, would establish an individual identity and secure the confidence of all sections.

We shall be looking for somebody of considerable ability and standing to undertake this important role. The co-operative movement recognises the need for a successful Agency, and that success will inevitably depend on the quality of its leadership. There will be wide consultation about this and the other appointments and the choices will be made with great care.

Clause 1 declares that the Agency is not to be regarded as a Crown servant or agent or as enjoying Crown status, privilege or immunity; nor will it be exempt from taxes or similar charges. Clause 1(6) gives effect to the provisions of the Schedule which refer to the appointment and tenure of office of members of the Agency, their remuneration, the disqualification of members for the House of Commons and Northern Ireland Assembly and the proceedings of the Agency.

The meat of the Bill is in Clause 2, which specifies the Agency's functions. These are designed to further the interests of the co-operative movement generally and are based on the majority recommendations of the working group's report. The report identified a need for a statutory body to watch over the range of the co-operative movement's many activities and to formulate views and attitudes which would reflect and promote the interests of the movement as a whole.

The Agency will be expected to work with existing co-operative organisations—which share a common faith in the general co-operative principles but which have widely separate interests—and to co-ordinate and facilitate the development of co-operative activities. The development of a working relationship between the Agency and the existing representative organisations will require each to be considerate of the interests of the other.

The Agency should not do those things which are better left with or remitted to co-operative organisations or statutory bodies already in existence. Nor should the Agency duplicate functions which are already being carried out adequately elsewhere.

The working group identified the need to provide new machinery to co-ordinate and facilitate the development of co-operation, firstly in those areas of economic activity that it already serves and also in possible new areas. The Agency will need to gather information from co-operative undertakings at home and abroad. It will need to undertake research studies to show how the co-operative approach might serve the public interest in particular situations and circumstances. The working group concluded that the identification of projects to be undertaken on a co-operative basis would stem mainly from requests for advice or guidance. But the Agency will have power to take the initiative in proposing co-operative projects where its studies and research show that there is a worthwhile opportunity.

The role of the Agency is advisory and promotional. It will be able to give guidance to individuals, co-operatives and co-operative representative organisations of many kinds. The Agency will appraise and evaluate projects and give advice accordingly. The aim is to encourage the development of successful co-operatives. Co-operation is not seen as a cure-all in every circumstance. The so-called "rescue" cases will continue to have to be considered on their merits under the existing legislative provisions as and when they arise.

The rescues of Meriden and KME, for example, have preserved a number of jobs. Meriden is now the last significant producer of motor cycles in the country, and both co-ops have survived difficulties caused by the once-redundant plant, machinery and people becoming some of the left-over scraps of capitalism. These rescues stimulated great interest in co-operative forms of production.

The Agency could have some part to play in some cases, but the working group recognised that turning failure into success in this way is fighting against heavy odds. The emphasis will be on founding co-operatives after a thorough appraisal of the prospect for viability. The Agency will take into account the importance of ensuring proper organisation, management and financing. The Agency will not dispose of public funds for investment in co-operative ventures. But I would expect the Agency to be able to facilitate finance for sound co-operative projects by helping with the applicant's presentation of his case and guiding him to the source of finance appropriate to his requirements.

The Department has, for instance, had several instances where applications have been made for regional financial assistance from putative co-operatives which has stretched the resources of the Department in assisting and assessing the cases. In one instance, a co-operative was proposed which was being promoted largely by a man who was a director of five companies in liquidation. He proposed selling the product to a yet further business that he owned. On the other hand, the workers were sincere and totally open. By working through an agency of the movement, such situations of potential exploitation and difficulty can thus be avoided.

One of the most important functions of the Agency will be to provide a forum for discussion and debate within the co-operative movement. It soon became apparent when the working group was formed that in some cases different branches of the co-operative movement were virtually unaware of each other's problems attitudes and aspirations. If the Agency is to achieve its representational objectives adequately, it will be necessary to reconcile differences of interest and approach so that the Agency can represent a common co-operative viewpoint on matters of major importance. This may take some time. The working group was confident that this could be done and that the Agency would be able to exercise a strong and persuasive influence in resolving differences of opinion and conflicts of interest.

Clause 4 of the Bill authorises the Secretary of State to make grants to the Agency up to a maximum total of £900,000. The working group estimated the annual cost of running the Agency to be about £300,000 and recommended that the Government should bear as launching finance the whole of the estimated cost of establishing and running it for three years. The Government accepted that recommendation. After this formative period, during which the Agency should develop its own sense of corporate purpose, its finances will be expected to derive essentially from voluntary contributions from the co-operative movement and income generated by the charging of fees for the Agency's services. The Secretary of State is also empowered to increase the maximum total grant within a ceiling figure of £1.5 million by order made by Statutory Instrument, which would have to be approved by resolution of the House.

Clause 5 contains the accounts and auditing provisions relating to the Agency. There is an important element of accountability to Parliament, and by virtue of Clause 6 the Agency will have to make an annual report on its operations to the Secretary of State, who will be under a duty to lay copies before both Houses of Parliament. I hope that in future years Parliament will find time to debate these annual reports on how the Agency is progressing. The remaining clauses deal with the technical financial provisions, short title and extent of the Bill.

There is one schedule, which is given effect by Clause 1(6). The schedule contains the detailed provisions as to the appointment, tenure of office and remuneration of members of the Agency. It disqualifies members of the Agency from membership of the House of Commons and the Northern Ireland Assembly. It also deals with the proceedings of the Agency.

I hope that the House will agree that the Bill is an important step, and I commend it to the House and hope that it commands the overwhelming support of hon. Members.

8.48 p.m.

Mr. Kenneth Clarke (Rushcliffe)

The Opposition give a cautious welcome to the Bill. We are not particularly cautious about the proposed Agency so long as the appointments to it are reasonably balanced. We are cautious about the Government's and the Labour movement's attitude to the development of worker co-operatives. The Conservative Party is favourably disposed towards worker co-operatives or worker-owned enterprises so long as they operate in the market on the same terms as their competitors.

We welcome co-operatives that engage in commercially sound activities, raise their capital from their members or the market, and do not rely on public subsidies or preferential treatment against their competitors. If the new Agency promotes the further development in this country of this form of private enterprise I would expect it to receive active support from a Conservative Government.

We disapprove strongly of the Government's record of giving taxpayers' money to uncompetitive worker co-operatives founded by illegal sit-ins or industrial action and promoted for political rather than economic reasons. If there was any hint in the Bill that the agency might result in a return to the "Bennery" that poured money into Meriden, Kirkby and the Scottish Daily News we would oppose it tooth and nail.

I am sure that many Labour Members, including some of those present tonight, are disappointed that the Bill gives the Agency no powers of that kind so far as we can detect. It appears that a lack of a parliamentary majority and an approaching General Election are preventing the Labour Party for the time being from achieving its real aim of promoting worker co-operatives as a step to Socialism. I see that some of the more Socialist Members on the Labour Benches nod in agreement at their disappointment at the Bill which does not further the aims they would wish to realise.

So the Bill, which must be something of a disappointment for the Minister who has presented it, given his known personal views, is setting up an Agency that has only a broadly defined advisory and promotional role. We on this side of the House are reassured to see, and delighted to hear the Minister making it clear to us, that it has no powers at all to invest public money directly in any commercial activities or engage in any commercial activity itself. Clause 3 seems to cover every possibility of this particular Minister being able to persuade the Agency to divert any public money into co-operatives that he favours. In Committee we shall try to make sure that it is absolutely watertight and that there is no question of subsidy finding its way to favoured political projects through this measure.

We hope, therefore, that, given that what is set up is an advisory and promotional body in the field of worker co-operatives with serious commercial purposes, it will commend itself to the co-operative movement, and that it will commend itself as far as possible to all sections of the co-operative movement. As the Minister pointed out, one of the difficulties that the working group very helpfully faced was that there is, in fact, a wide range of activity within the present co-operative movement and somewhat of a contract between the long-established, very successful and, therefore, somewhat dominant, retail societies and the Co-operative Wholesale Society, on the one hand, and some of the newer developments, on the other.

One has no whatsoever towards the retail societies and the Co-operative Wholesale Society, which we hope will derive considerable benefit from and will contribute a great deal to this Agency, but I am sure that some of the hon. Members present who will be trying to catch the eye of the Chair and who are closely associated with the movement will not think that we are disparaging when we say that the major interest is in seeing what can be done to develop areas of worker co-operation and worker common ownership in industrial manufacturing activity in this country.

One hopes, therefore, that the newer groups will not be under-represented on the new Agency. We accept the working group's recommendation, as the Government have done, that the best way of dealing with the wide range of interests that might be represented is to have the members of the Agency appointed by the Government. That will be an effective safeguard against domination by the larger and established bodies if a democratic method of election gave weight to their size, or an under-representation of those bodies if proposals were accepted that the election should be by each individual part of the movement regardless of its size. We think that appointment by the Government could actually be a safeguard, if appointments are wisely made, against the over-domination of the Agency by any particular section of the movement.

Also, it would be advisable that the members of the Agency look upon themselves, once appointed, as independent people, with an interest in co-operation generally, and not as directly beholden, as elected representatives, to any particular sectional interest.

Similarly, in the case of the financing, we again agree with the Government in their acceptance of the working group's basic aim, which is that the Agency should ultimately be self-financing, once it has got established, and derive its income from voluntary contributions from the co-operative movement and from fees charged for its services.

But clearly the Agency cannot be launched satisfactorily on that basis. If it were launched immediately on the basis of self-financing, it would be totally dependent on the large retail societies and the Co-operative Wholesale Society, which are the only organisations with resources that could be looked to to finance an operation of this kind. Therefore, we agree with the basic aim of the Bill, as we see it, and accept the working group's recommendation that the Government should bear the cost of the initial finance for the first three years—which seems to be subject to a proviso that could cover five years—which is the intention of the Bill as it is before the House.

Having, therefore, agreed with the basic outlines of the Agency, and having stated the basis upon which we are interested in the development of co-operation, what would one expect the Agency to promote positively that might be a useful contribution and addition to the structure of industrial activity in this country? I am sure that I shall be only the first in this debate to mention the attention that has recently been directed to, for instance, the Mondragon industrial co-operatives in the Basque area of Spain. I am sure that many hon. Members, and probably most of those present, as they are interested in the subject, have given considerable attention to the recent study by the Anglo-German Foundation for the Study of Industrial Society on the work of the Mondragon co-operatives in Spain.

There are a large number of very useful lessons to be drawn from that study. I am not saying that the Mondragon experiment can necessarily be directly transplanted to this country, but many lessons can be drawn from it. They are lessons that help to explain why the whole principle of co-operative activity in industrial manufacturing and worker ownership has a great deal to commend itself to Opposition Members as well as to Labour Members.

The first lesson that I would draw from the recent studies of the Mondragon co-operatives is that the individual workers' financial commitment to the success of the enterprise has been one of the movement's key factors in making for its success in the group of co-operatives that is now flourishing in Northern Spain. New workers entering the co-operatives under the Mondragon umbrella are required to pay at least £1,000 when joining, although it can be deducted from their pay over two years. The profits or losses made by the co-operative are in part added to or deducted from a member's personal holdings. The result has been that some workers in the co-operatives which have largely succeeded have received substantial capital sums themselves, either upon their retirement or upon their change of employment and withdrawal from the co-operative.

We think that it is instructive to a Government who do not appear to believe in the value of incentives in industry to get the point from Mondragon that the workers' personal financial interest is directly linked to the success of the enterprise achieved under the Mondragon umbrella.

I am not totally rejecting the common ownership movement that we have here, but the Mondragon experience contrasts with the present practice of common ownership, whereby there is no normal direct return to the members themselves. Mondragon is an organisation which creates capitalists and spreads the ownership of the company through workers acquiring a direct personal financial stake in its success. We think that that is commendable.

Mr. Tom Litterick (Birmingham, Selly Oak)

Would not the hon. Member at least consider the possibility that one of the keys to the success of the Mondragon projects has been the system of accountability within the managerial system? It operates in such a way that it is impossible for any managers to operate in any remotely authoritarian way: they are accountable and sackable.

Mr. Clarke

I am grateful to the hon. Member, because the management structure again appears to be one of the keys of success in the Mondragon movement—although I would not interpret it in quite the way that the hon. Gentleman has. The Mondragon co-operatives have all succeeded in providing sophisticated management expertise within a co-operative structure. The managers are appointed by a control board elected by the workers, but once appointed they are in practice left free to get on with the specialised job of management within the policy decisions laid down by the control board.

As a result, they are certainly not in a totally authoritarian role, as the hon. Member says, because there is a supervisory board elected by the workers. But there are managers, and the specialised techniques of management are recognised in Mondragon. One does not see there the sort of thing that happened in the case of the Meriden co-operative in this country when a co-operative was set up headed by people who were trying to manage but who had no experience of management and who ultimately had to bring in skilled management advice from outside.

There is a further question which is very relevant to what has made for the success of the Mondragon co-operative and which might apply here, namely, the tightly-disciplined provision of finance to the Mondragon group of co-operatives by the Caja Laboral, which is a co-operative bank. Although it is a co-operative bank, closely allied to the movement, it is significant and instructive that there is no question in the financing of Mondragon co-operatives of any kind of Socialist escape from the realities of the market place.

The Mondragon co-operatives are obliged to recognise the need to produce a return on their capital and to finance future investment in a successful project out of some earned return on capital. Again, that contrasts with some of the experiences that we have had in recent years under this Government.

Mr. David Watkins (Consett)

I am listening with interest to the hon. Gentleman's accurate description of the Mondragon management set-up, but is he not aware that there is virtually an identical management set-up and responsibility and control in the Scott Bader Commonwealth, which the Minister mentioned, which is the pioneer of the common ownership-type of co-operative organisation, with neutralised capital? It is difficult to see therefore that the hon. Gentleman is making any effective point at all.

Mr. Clarke

I accept straightaway that in discussing Mondragon I am not advocating that there should be a blueprint for worker co-operatives or worker ownership in this country which the agency should promote. I was using Mondragon only as a successful example of private enterprise working within the market on a common ownership basis, recognising the needs for financial discipline, for sophisticated management and for a direct personal financial stake by the workers in the co-operative concerned.

Of course, there are variations. I bear in mind that the hon. Gentleman was the promoter of a common ownership Bill. We did not object to that measure and do not reject that approach. There are other forms, the most notable being the Scott Bader Commonwealth. I try to keep in contact with it through my hon. Friend the Member for Wellingborough (Mr. Fry). He keeps in touch with that Company, which has been successfully pursuing a common ownership approach since 1951. It has had considerable success in chemicals and plastics, and its practices could with profit be followed. One could also refer to the experiences of Sunderlandia, the Rowan Community and other examples in this country.

I refer to the Mondragon experience as something to be explored with profit. I quote it as the most interesting example of foreign experience, which the Agency is specifically enjoined to study. It also explains clearly why there is no inconsistency between our approach to the proper management of the economy and our support for the aims of the Agency.

One thing that the various forms of worker co-operative have in common is that they are almost all small or medium-sized businesses. The experience everywhere seems to be that there is no advantage in trying to run at a giant enterprise on a co-operative basis. These are small businesses, and the Agency could usefully promote the development of further small businesses. In the present state of the economy, all kinds of small business and entrepreneurship need to be encouraged. It is in the small business sector that we have the most promising hopes of creating the new employment we need if the economic climate can be made right.

Another thing that these concerns have in common is their various ways of ensuring that there is an identity of interest between the worker and the enterprise within which he works. Given that in this country we all accept that there is an unfortunate tradition of conflict, far too often, between management and shop floor in far too many of our enterprises, however they may be organised, whether nationalised or private, one feature that a co-operative ought to have is a genuine identity of interests between the worker and the enterprise. He should see his own personal advantage as directly related to the success of the whole operation. But these enterprises have to be competitive in a very difficult market, as with every other form of industrial activity that we have in this country.

Mr. Laurie Pavitt (Brent, South)

Would the hon. Gentleman describe the consumer durable Mondragon scheme, employing 3,500 people, as a small co-operative?

Mr. Clarke

That is the pioneer organisation which started Mondragon, and it is the biggest that I have ever come across. It has developed into the largest member of a movement with a large number of smaller co-operatives linked with it. I suppose that 3,500 employees is a reasonable size. It is the biggest domestic appliance manufacturer in Spain and dominates the market. The Scott Bader Commonwealth has 430 people. I know of no bigger enterprise here of that sort.

One of the features of the co-operative approach is that it must be easier to run an organisation effectively and democratically if its size is kept down to reasonable proportions. I do not see any prospects of British Leyland becoming a worker co-operative as a group in the very near future.

Dr. Jeremy Bray (Motherwell and Wishaw)

The hon. Gentleman is excluding all the major Yugoslav co-operative enterprises, some of which are quite large.

Mr. Clarke

I have never given them any study. I trust that the Agency, when it gets under way, will perhaps conduct some studies in Yugoslavia and I can then profit from them.

Mr. Cryer

I should point out that the two co-operatives which the hon. Gentleman was so slighting about—Meriden and KME—comprise between them about 1,500 jobs. One has approximately 700 employees and the other 800 employees. Those are two enterprises which are run on co-operative lines which the hon. Gentleman is excluding from his sights. Does that mean that the Conservative view towards Meriden and KME is so uncharitable that the Conservative Party would see them out of existence at the earliest opportunity?

Mr. Clarke

I know that the Minister has had to deliver a fairly non-controversial brief. He is dying for me to go on to something controversial. I shall not disappoint him. I shall make some comments about Meriden and Kirkby. I shall point out that the Meriden co-operative destroyed the jobs of people otherwise working for Norton Villiers Triumph Ltd. at Wolverhampton and Small Heath, and the subsidy of the Kirkby co-operative with regard to domestic radiators destroyed the jobs of people working for Penrad in Swansea and in other competitor industries.

The Minister need not worry I shall make one or two comments about Kirkby and Meriden in the concluding part of my speech. Perhaps I shall also not give way so often in order to give other hon. Members the chance of speaking at a reasonable hour.

That takes me on to the Government's approach, which, before the promotion of this Bill, has been to look upon worker co-operatives as a political objective in themselves and, in particular, as a way of expediting rescues where they are under political pressure from particular areas. We are very doubtful about that. I am very reassured by the report of the working group on a co-operative development agency which on page 5 sets out very clearly the dangers of identifying the idea of worker co-operatives with dead, dying or rescued companies.

The working group states: In sum, Co-operation offers a potential in motivation. Provided the decision to start a co-operative is founded on a thorough appraisal of the prospect for its viability, and provided the enterprise is properly organised, financed and managed, that potential is there to be realised as the remaining ingredient without which full success cannot be guaranteed. But there is some danger where co-operatives are created out of economic adversity, for the situation is then one of commercial crisis and, important through the rescue may be on general grounds, it is far from an ideal basis on which to promote the reputation of co-operatives generally, or of Co-operation as an alternative form of organisation. They are mild comments, but they are the kind of comments that we have been making throughout in our strictures on the Government's support of Meriden and Kirkby, both of them born out of industrial pressure, sit ins and the seizure of property supported very heavily and politically by the Left wing of the Labour Party within this House.

Meriden, in fact, thrust itself into the motor cycle business and put men out of work in what would otherwise have been a rescue operation conducted under the umbrella of Norton Villiers Triumph Ltd. at Small Heath and Wolverhampton. It has not been a commercially viable organisation so far. Taxpayers' money on a very generous scale has been given to that co-operative—taxpayers' money taken out of the pockets of other successful enterprises. It was launched with what was said to be a once-and-for-all grant of £750,000 and a loan of £4.05 million. It lost £1 million in its first year of operation. By October 1975 it had to have another Government loan of £150,000. By March 1977 it was on the rocks again and laid off 600 of its employees because it had failed to make itself competitive. GEC, under the aegis of Sir Arnold Weinstock, then stepped in with an offer of £1 million and the Government were obliged to give it a further grant of £500,000 and to defer interest payments on public money loaned to it worth over £1 million.

That was the last rescue which occurred about a year ago. I do not know whether the Minister will confirm it this evening, but my understanding is that Meriden is fishing around again for yet more public money which it wants granted under the Industry Act. We wait to hear whether the Government will give it yet more money and whether the Industrial Development Advisory Board will again advise against it.

It still seems to us to be making very little progress. I understand that Lord Stokes and Sir Arnold Weinstock have withdrawn from their management roles. The management in the United States have been replaced and the co-operative is still in trouble. That was a co-operative which was backed for purely political reasons. It has put other men out of jobs and is constantly draining public money because the Government are committed to it.

Kirkby has been mentioned by the Minister, and that is the other best example of how this Government have promoted worker co-operation during their period of office. That is a company which engages in a diverse range of products, again created after industrial dispute and a sit-in. Its activities are heavily subsidised. I quoted radiators. In my opinion this has led directly to the bankruptcy of another company—Penrad in Swansea—which was being supported by public money by the Welsh Office in competition with the greater resources which the Department of Industry was pouring into Kirkby. Kirkby was launched in January 1975 with a public grant of £3.9 million of taxpayers' money. It lost £1.5 million in its first year of trading. Last year it was back again. The advice has always been that Kirkby is not a viable operation. Yet it had another £860,000 of Government money, and that was paid despite the fact that the independent Industrial Development Advisory Board advised the Government that the firm was outside the Government's guidelines in seeking further financial assistance.

At present Kirkby losses have been declared for 1976–77 as only £381,249. In fact, it is receiving temporary employment subsidy. No one knows how much, but it is my firm belief that the firm is losing, more than £1 million a year. It is in trouble again, and if it is to continue it will no doubt need a lot more Government money.

In fact, the firm has announced at long last that it will discontinue its soft drink manufacture and its storage radiator manufacture. At long last it is accepting the advice that has always been given by consultants that these operations had no sound commercial basis at all. Because it is a worker co-operative and because some hon. Members are firmly committed to it and the Socialist movement is behind it, it hasc had huge sums of public money to maintain a small number of jobs in Kirkby, to destroy jobs in successful operations elsewhere and to keep it in business.

The Labour Party has not changed its mind at all about the promotion of worker co-operatives. If my own Member of Parliament, the hon. Member for Birmingham, Selly Oak (Mr. Litterik), comes back into the Chamber and catches your eye, Mr. Deputy Speaker, I have no doubt that he will join with his hon. Friends in trying to strengthen this Bill to pour more millions of pounds into worker co-operatives wherever the next sit-in is organised by a fringe group of the trade union movement.

Mr. Ioan Evans (Aberdare)

I wonder whether the hon. Member would explain why this Government and previous Governments have given thousands of millions of pounds of aid to private enterprise? He refers to the fact that this firm is getting temporary employment subsidy. Hundreds of private enterprise firms are getting it also. Why is he discriminating against these two firms, which are failed private enterprise firms and which the workers have tried to take over in order to save their jobs? The only thing that this Bill is doing is giving aid to workers' co-operatives, when Governments have given thousands of millions to private enterprise in the past.

Mr. Clarke

I am disappointed in the hon. Member. He and I often agree in our criticism of the Government for giving aid to a wide range of private enterprise activities. However, we shall not go into the scale on which the Government at present spend the taxpayers' money. I know the hon. Member disapproves of it.

There is one distinction that one can draw between these two firms and the others. The Government's own guidelines for the basis upon which it gives financial assistance insist that there must be some prospect of commercial viability before giving the aid. For that purpose there is the independent Industrial Development Advisory Board, which advises the Government on the prospect of success and the commercial wisdom of investments proposed. The Government are not bound to accept the advice, but they usually do.

In the case of private enterprise companies, ordinarily organised, the Government have accepted the advice in every case for some years now. If the advice has been against the company, the money has not been forthcoming. Only in the cases of Meriden and of Kirkby the advice of IDAB has been overruled every time that those two firms had come back for more money. IDAB has always advised that they are not commercially viable because they are being organised in ways that are doomed to produce a situation in which each year the jobs involved are supported by money taken from the pockets of the taxpayers in other jobs elsewhere. It is this discrimination in favour of worker co-operatives that we disapprove of.

I have a paper called "Building Britain's Future" which is described as "Labour's Policy on Construction" and which was printed by the Labour Party in October 1977. It is designed to show that the Labour movement and the Government have not changed their minds on the purpose of promoting worker co-operatives preferentially, and subsidised vis-a-vis their competitors. The document sets out the outrageous policy of nationalising large parts of the construction industry to which the Labour Government are committed. One paragraph, headed "Workers' co-operatives" says: Among the locally based firms, we believe the best way of extending social ownership is through the encouragement of workers' co-operatives. The Government now has powers, under the Industrial Common Ownership Act, to provide financial assistance to co-ops. We believe that this assistance should be increased, and new powers taken as necessary, and we remain committed also to the establishment of a Co-operative Development Agency. Trade unionists in the industry could perhaps themselves take the initiative in establishing co-operatives, and public bodies could actively assist by favouring co-ops in allocating work. That is the policy of the Labour movement. It is most objectionable because it takes the view that if one organises on co-operative lines, one should have access to taxpayers' money and be given financial assistance to which other small enterprises, employing perhaps similar numbers of people, will not have access. It provides that public bodies in allocating work should actively favour co-operatives. It involves the spending of public money to buy more goods and materials than would otherwise happen in order to buy the less competitive product or service offered by the co-operatives.

That has been the approach of this Government. Kirkby has been kept in business in part by Labour local authorities buying radiators and not looking competitively through the market. At long last they have had to give up the radiators because it is costing so much.

I ask the Minister to comment on this document issued in October 1977 and entitled "Labour's Policy on Construction". Is it the Government's attitude towards workers' co-operatives not to follow the desirable and anodyne aims set out in the Bill but ultimately to try to pave the way, if ever they get a majority, towards a situation where the taxpayer subsidises co-operatives and where public bodies that are run by Socialists favour co-operatives vis-à-vis private competitors?

Mr. Litterick

I regret that I was absent for a few minutes during the hon. Gentleman's speech. He has expressed himself strongly and in uncompromising terms about what he calls taxpayers' subsidies or taxpayers' money being used to subsidise enterprises of this sort. But he must be aware that taxpayers' money is being used currently to the tune of around £3,000 million a year to subsidise private enterprise—or at least what the hon. Gentleman would call "private enterprise". Since he has not qualified his attitude on public subsidies to commercial enterprises, is he saying that that £3,000 million should be withdrawn? Does he understand what the consequences would be?

Mr. Clarke

The hon. Gentleman has been present for most of the debate, but he was out for a few moments when that same point was put to me by one of his hon. Friends. I then gave my answer. Perhaps later I shall write a letter to my Member of Parliament giving my view on the subject.

I have described the clear difference between our approaches. The Bill, to the disappointment of the Minister and most of his colleagues, does not seek to confer on the Government powers to pursue their real policy towards co-operatives. We condemn and denounce the approach which I have described. We certainly are opposed to the idea that co-operatives should mean the spending of public resources, seizure of property by workers, or any active steps towards Socialism.

Mr. Cryer

The hon. Gentleman made a serious allegation that KME, a co-operative employing about 800 people who depend for their livelihood on the operation of that co-operative, had ceased to make radiators. Is he aware that at the heating and ventilation exhibition in Birmingham held this week that co-operative has a stand and is selling radiators? It is making and selling radiators. Does he acknowledge that by making foolhardy remarks of the sort he has he could prejudice the financial position of that co-operative which is endeavouring to sell its products? Does he not wish to withdraw that statement in view of the possible damage it might do?

Mr. Clarke

I would not wish to do anything to damage its genuine commercial activity. I am relying on reports to the effect that the 700 present employees are to be reduced to 600 because the co-operative has at last accepted advice that it must discontinue the manufacture of soft drinks and storage radiators. It may still be selling radiators and perhaps I am misinformed. I am sorry if that is the case, but, if it is still manufacturing them, it is producing them subsidised by the public. If public subsidies are discounted, it is probably losing more than £1 million. It is selling radiators at a subsidised price in a market that has great over-capacity. There is more capacity in the manufacture of radiators than the market can absorb.

The Kirkby co-operative is being subsidised in such a way that it keeps a market share that it would not otherwise win and it is putting people out of work elsewhere. Competitors cannot hold their own against this weight of public money and are having to discontinue production. Even a company receiving public subsidy—from a weaker Department—had to go to the wall because it could not compete with the vast sums of money being poured into Kirkby. We strongly reject that, but we suspect that if the Government could get their way they would like to pursue that sort of approach.

Co-operatives can mean genuine workers' ownership, a direct interest in the job for the worker and a reduction of conflict between the interests of the worker and the enterprise. We see them as a valuable form of free enterprise and a healthy sector that could be encouraged to work within a market economy. We hope that the Agency will promote that idea and we wish it well in seeking to do so.

9.21 p.m.

Mr. Sydney Irving (Dartford)

For a number of hon. Members in the Chamber, this is a very important moment because it is the culmination of 10 years' effort by the co-operative movement and the co-operative parliamentary group, of which I am chairman, to get recognition for the idea of a Co-operative Development Agency and to secure a Government Bill.

I therefore congratulate the Government on the introduction of the Bill and pay special tribute to my right hon. Friend the Prime Minister, without whose interest and support the Bill would not have been introduced this Session. It was his speedy acceptance of the majority report in October which opened the way for the possibility of getting the Bill this Session. I should also like to thank my right hon. Friend the Member for Swansea, West (Mr. Williams), the Minister of State, Department of Industry, for his generous assistance from before the inception of the working party up to now. We are very grateful for that help.

The co-operative movement, with its tradition of voluntarism and self-help, has long believed that co-operation is a form of social ownership in its own right relevant to the needs of ordinary people in their daily lives. It meets many of the requirements of the modern world. It encourages participation, stimulates individual effort and insists on democratic control. Standing between nationalisation on the one hand and private enterprise on the other, it is certainly not a second-class substitute for either, and, because of the voluntary spirit upon which it relies, it grows from the grass roots and cannot be imposed from above.

As my hon. Friend the Minister said, the movement has largely been identified in this country with the retail movement. The British movement is the largest in the world, but we believe that its principles are of universal application and there are a number of examples in this country outside the retail movement where the principles are being effectively applied. There are co-operatives in industry, in the service industries, in fishing, housing, credit and depositing, and in my constituency there is an estate of 300 houses managed by tenants who look after their own affairs.

Co-operation is about to enter an active period of development. An interest in co-operation has grown remarkably in recent years, and there has been a need for an agency to co-ordinate and encourage the development of co-operatives. The new Agency will be advisory and promotional and will have an important role in education and research. It will be a focus for the views and attitudes of the movement, but it will be independent and able to carry out its own policies.

In encouraging a vigorous co-operative sector, the Agency will have no funds of its own, but that is not to say that there are not substantial funds available to co-operatives already. This applies in housing through the Housing Corporation, in agriculture and fisheries through the Department, and in industry through the Industry Acts.

It will be the duty of the Agency to embody the necessary experience and expertise to be able to advise both on the principles and practice of co-operation and on the ways in which co-operatives can secure aid to fulfil the objectives that they set themselves. It will be by the expert status of the Agency that it will be enabled to advise Governments on the social and economic viability of co-operatives seeking assistance.

Social and economic viability will be an important requirement. The Agency will wish to help any group that genuinely wants to form a co-operative, but it will not wish to be the repository or refuge of uneconomic ventures that are the failures of the private enterprise system, although it will undoubtedly assist those who have the determination to practise the principles of co-operation and to become viable.

The CDA is not a new priniciple. The Central Council for Agriculture and Horticulture, the Co-operative Housing Agency and the arrangements under the Industrial Common Ownership Act are all examples of assistance given by Goverenment to help co-operatives. In other words, they are mini CDAs.

The success of the Agency will depend very much on the chairman and the members of the Agency. The chairman needs to be someone of great ability and with great experience in the movement to be able to command the confidence both of the House and of the movement. We are grateful to my hon. Friend the Under-Secretary of State, who has undertaken to consult widely before a decision is taken.

I have undertaken to speak briefly because many of my hon. Friends wish to speak. Finally, I once again welcome the Bill. I wish it well and hope that it will have a speedy passage through the House.

9.28 p.m.

Mr. J. Grimond (Orkney and Shetland)

I am glad to take up the remarks of the right hon. Member for Dartford (Mr. Irving) as I find myself in agreement with practically everything he said.

The House should give the Bill a fair wind. It will have to be examined in Committee, and at that stage there are certain points that will have to be made. The only serious reservation that I have is about the setting up of another board or agency. We have so many already that to increase the Government's power of patronage, or even the expenditure of public money on yet another one, fills me with concern. However, the Minister has assured us that the expenditure of money—this is what he hopes—will not be necessary after three years. I believe that he is right. I do not see why the Agency should not thereafter finance itself from fees or contributions.

After three years, or whatever the period may be, let us consider the necessity of the Agency again. If it is necessary, it may be necessary in a rather different form. However, it may be as well to remove it from Government control altogether.

I, too, believe that co-operatives can enable the country to meet many of its difficulties. To the list of industries and occupations that the Minister has mentioned which run co-operatives of various sorts I add the inshore fishing industry, which has a long tradition of common ownership of fishing boats. In this country we have not only the largest retail co-operative movement in the world but many interesting experiments in producer co-operatives. However, there is a great difference between consumer co-operatives and producer co-operatives. I am not certain that the Bill makes that difference. Both forms of co-operatives are valuable, but they are different.

The kind of producer co-operatives that I hope we shall encourage are those which are wholly owned and largely financed by their members. They should not merely be operated on a form of profit-sharing. They should not, to my mind, be businesses in which those who run them are appointed by organisations outside, even though they may be workers' organisations. But they should be businesses which the workers generally control, to which they appoint the management and for which they raise or provide most of the capital.

I have visited the Mondragon co-operatives. In addition to what has already been said about them, I should like to point to certain other features. First, they have managed to mobilise local patriotism. In this country there is considerable interest, not only in Scotland and Wales but in the North of England and in other parts of England, in various forms of local patriotism. It is remarkable that in the province of Biscaya the Mondragon co-operatives have managed to play on local patriotism and have raised large sums of money from local people. They have also generated enthusiasm among people to make their home areas as good as they can be.

Secondly, they are highly sophisticated in their technology. There is no question of their being some form of low, peasant-like activity. On the contrary, their research department is one of the best in Western Europe. Thirdly, the bank is central to the whole operation. It not only supplies the finance and a great deal of management expertise but vets any new candidates to the co-operative movement.

Lastly, but most important, there are groups of co-operatives. There are about 60. They are being founded at the rate of about four a year. As has been said, that is happening in some parts of this country, though on a much smaller scale. It seems highly desirable that co-operatives should be in groups so that there is a wider spread of activities. If one co-operative has to lay off labour, according to the Mondragon principle employment to that labour should be offered elsewhere so that people who may be laid off during a depression have another chance of employment.

There are valuable lessons to be learnt. I am glad that the Bill does not deal with investment in co-operatives. As has been said, they should have ordinary access to various forms of raising money which are available to all firms in this country. I am surprised that £900,000 for three years should be required to run the Agency. That is a generous allocation.

I should like to think that what we are doing in the Bill might be linked to another Bill which is now going through the House—the Trustee Savings Banks Bill. I strongly believe that savings banks take money out of production in their local districts. I should like the savings banks to invest in their local areas where they raise their money. I should like them to invest in particular in co-operative enterprises of the kind that the Bill will promote. I hope, therefore, that the two Bills might at some point be linked together.

Like other hon. Members, I wish to be brief. Those are all the points that I want to make on Second Reading. However, I finish by apologising to the House for the fact that I may have to leave before the end of the debate. My constituency is a long way off and I must be there tomorrow. The night is drawing on, but I have an hour or two yet. I hope that the Minister and the House will forgive me if I have to leave before the final speeches.

9.33 p.m.

Mr. Ioan Evans (Aberdare)

I am sure that we understand why the right hon. Member for Orkney and Shetland (Mr. Grimond) has to leave the debate. I think that in the discussions that have been taking place on North Sea oil the people of the Shetlands have been dear to the hearts of all hon. Members on both sides of the House. I am pleased that the right hon. Gentleman welcomed the Bill.

As my right hon. Friend the Member for Dartford (Mr. Irving) said, Labour Members connected with the co-operative movement are delighted that we are having the Second Reading of the Bill. A great deal of credit must be given to Ministers in the Department. They recognised that this was a commitment in our manifesto and they have found time to bring the Bill before the House this Session. Some of us have been calling for this legislation for a very long time. Indeed, since the Government came into power in 1974 many of us have pressed them time and again to bring the Bill before the House.

I have one small regret. We have had a busy Session. The National Enterprise Board and the Scottish and Welsh Development Agency measures are now on the statute book. I believe that the work of the Co-operative Development Agency will be complementary to the work done by the NEB and the Scottish and Welsh Development Agencies, and one would have hoped that provision for this body, too, would have been on the statute book by now. However, we realise that plans for the Co-operative Development Agency had to be formulated and that the working party therefore had to be set up.

As soon as the working party's report was published, as my right hon. Friend the Member for Dartford said, the Prime Minister announced the Government's support for the majority report. Speaking at the Co-operative Party's sixtieth anniversary rally at Central Hall, Westminster, he said: It is our strong view that successfully organised and conducted producer co-operatives and common ownership enterprises offer a solution to the problem of encouraging all those who work in an enterprise in a pursuit of ends which should be complementary and which too often seem to be opposed … We take the view that co-operation has a role to play on a wider and a more active basis than previously … I undertake on behalf of the Government that as soon as we can get legislative time available we shall introduce legislation to set up a Co-operative Development Agency. That was a firm commitment by the Prime Minister, and I think that some of us were disappointed when we read the Queen's Speech and found that the Co-operative Development Agency was not in the Government's programme. Some of us were disappointed that we had been presented with another Queen's Speech containing no mention of the CDA. Therefore, it is all the more pleasing that in this Session, although there was no mention of it in the Queen's Speech, we now have the Bill before us for its Second Reading. I hope that it will be given a speedy passage through Committee—it is only an eight-clause measure—so that it can come back to the Floor of the House in a short time and soon thereafter become an Act of Parliament.

I want to refer briefly to Clause 2, which deals with the functions of the Co-operative Development Agency. The clause talks about promoting the principles and representing the interests of the co-operative movement. Much has been done to promote private enterprise and to encourage nationalised industries. Why, therefore, should we not have an agency that will promote co-operative organisations? I take up the point made by the hon. Member for Rushcliffe (Mr. Clarke). Time and again, private enterprise has come along with its begging bowl to various Government Departments to ask for financial help. It was the Conservative Party which introduced the Industry Act to give financial assistance to private enterprise. As one of my hon. Friends said, about £3,000 million is provided every year to bolster failing private enterprises.

We now have a situation where, in certain cases, groups of workers are thrown out of work. On previous occasions I have given the House an example of a firm in my constituency which was taken over. The firm had good management, good workers, good industrial relations and a good order book, but, merely because it was taken over by a subsidiary of Slater-Walker, and because a private firm collapsed, those workers went to work one day and found a notice on the door saying "You are no longer in employment because the company is in the hands of a receiver and is going into liquidation." That was nothing to do with the product, and it was nothing to do with the management or workers. It was a failure of private capitalism.

The workers met and said that they would like to form a workers' co-operative. The management came with them. They drew up a scheme and approached me as their Member of Parliament. Unfortunately, there was no one to whom they could turn to give them the necessary help to form a workers' co-operative. I believe that the Agency will give such workers that assistance in future.

The second purpose is to identify and recommend ways in which the establishment and development of co-operatives might be facilitated". As my hon. Friend the Minister said, the co-operative movement was started in this country. It was started by Robert Owen, a Welshman. Like all good Welshmen, he was an internationalist. He did not stay in Wales to form his co-operative but went up to Scotland to try to form a co-operative community in New Lanark. He even went further afield. He went across the seas to America, to form a co-operative community in New Harmony.

Robert Owen was not only one of the original co-operators but was an original Socialist. In fact, it was in an Owenite magazine that the word "Socialist" was first used. He was also an original founder of the trade union movement. We in this country owe Robert Owen a great deal. He led to the group that met in Rochdale and formed the retail co-operative movement in this country, which now numbers 10½ million people.

I shall not dwell on the development of the co-operative movement, because I am very pleased that my hon. Friend the Minister gave his historical analysis. But we must bear in mind that here we were talking about a retail co-operative movement, whereas we now find throughout the world that co-operation is taking other forms.

The third purpose is to identify and recommend projects which might usefully be undertaken on a co-operative basis". As I have said, in this country we have tended to develop the retail co-operative movement, which is a strong force. But there is great scope for the extension of workers' co-operatives, with which I believe the Agency will be primarily concerned. I hope that it will work with those other bodies connected with the co-operative movement and that there will be the development of agricultural co-operatives.

In Scandinavia, particularly in Denmark, there is a greater development of agricultural co-operatives than we have had in this country. We need to have similar growth here. There are also housing co-operatives, and in America there are even student co-operatives. The idea of co-operation, which we have worked so well on the consumer side in this country, can be extended into other fields. We should seek to develop this type of co-operative activity.

The hon. Member for Rushcliffe tried to speak of the development of co-operatives as if they were a form of private enterprise, but they are a form of common ownership. The co-operative movement is a do-it-yourself form of Socialism. We can have Socialist action by Act of Parliament, by taking action on a national basis. We had an act of Socialism by the Conservative Party when it took Rolls-Royce into public ownership. It was a form of nationalisation. But we can have Socialism in other ways.

We see that another function is to appraise and evaluate projects which are to be undertaken on such a basis". Here I agree with what the working party said, that we should not think only in terms of failures of private enterprise but that we need to make a proper appraisal and evaluation, to have the expert assistance to move into new fields and to develop co-operatives.

I know that many hon. Members want to take part in the debate, and I know, Mr. Speaker, that you now have a rule about speeches taking eight minutes, and I hope that I have not exceeded that.

Mr. Speaker

The hon. Gentleman is comfortably over that.

Mr. Evans

I am glad, Mr. Speaker, that I am comfortably over it and not uncomfortably.

May I say, without going through the other parts of the clause, that I welcome the Bill. Last week I was at an Inter-Parliamentary Union meeting in Lisbon. Parliamentarians from all parts of the world were present, and they were saying that many of them had gained their democratic experience through their association with the co-operative movements in their countries.

It was here in Britain that the co-operative movement was founded. I am glad that at long last this Government have seen the wisdom of bringing into being a Co-operative Development Agency, which will see that in this country we have not only a strong retail consumers' movement but a strong co-operative movement in all the various other sectors, and particularly in the working sector. I believe that the co-operative movement has a large part to play in dealing with unemployment as it affects small firms.

9.45 p.m.

Mr. Laurie Pavitt (Brent, South)

The last time that I spoke on the Co-operative Development Agency, I lectured to the Co-operative College. On that occasion I took one hour, and I took one and a half hours over questions and discussion. Tonight, I undertake to take only eight minutes. For that reason, I hope that my hon. Friends will forgive me if I do not take up some of the points they have made, although I am tempted to do so.

Tonight I wish to commend the Bill on its general principles. There are nine positive parts to the clauses which give the body to the Bill and there are four exclusions. Most of these matters will be major items of debate in Committee.

I should like to commiserate with my hon. Friend the Member for Edmonton (Mr. Graham), who sits on the Front Bench as a Whip, because no man has done more for the Co-operative Agency than he. Because he is a Whip, he is excluded from the debate. I pay tribute to him for his work which led to the Bill.

As my right hon. Friend the Member for Dartford (Mr. Irving) said, the Bill is long overdue. It has had a gestation period of 10 years. However, perhaps one of the advantages is that it is being born in a climate in which it can bear good fruit. The basic point for this type of concept in economic and social relations exists in the fact that increased mechanism and large-scale production has led to boredom and materialism which should have made for a full life and enriched personalities. Instead, it has led to disappointment and hopes which have been left unrealised. The media sometimes increase this feeling of disappointment in advertising false dreams.

The crying need in the 1970s and 1980s is for participation and involvement. The Agency is a small step which will enable that desire to be realised by the encouragement of co-operative enterprises.

Hon. Members have drawn attention to co-operatives overseas. I was pleased that the right hon. Member for Orkney and Shetland (Mr. Grimond) led the delegation to Mondragon. I wish that he had looked at the same time at Catalonia, where he would have seen similar things. I go back even further. It is interesting that this legislation is similar to that introduced by the imperialist British Raj in India in 1906. At that time India had almost the same problem. There was a passive peasantry. There was a need to activate people to run their own affairs rather than look for some fate or destiny so to do. As a result of that, in India today there are 60 different forms of co-operative society. However, only rarely does one see the form of co-operative which is so familiar in our own country—the consumers' co-operative movement. I doubt whether the Agency, in the various forms that it will assist, can help the growth of toddy tappers societies, stag bull societies or tube well societies and many others that I have seen in Asia. But to one type which is widespread in developing countries will give stimulus, namely, credit unions.

Against the background of the economic crises that we have experienced in the last four or five years, it might redress the balance because we have been preoccupied with production. More and more do we need to balance production with good services. I can see great scope for the Agency in giving extra advice and opinion and educational facilities for co-operatives in sub-contracting and specialist firms for building construction. One of the big problems that every hon. Member has experienced is to know whether the repair of his car has been well done. Why not have co-operatives involving repairs to cars, electrical services, plumbing services, domestic machinery and rural services to provide mutually those services which are no longer profitable enough for capitalist enterprise?

There is special scope for the "small is beautiful" concept. In inner urban areas in particular there is a great need. This approach should seek to rehabilitate areas such as mine, where there are 66 firms which have failed under capitalist enterprise in the last seven years. Most of these matters will be dealt with in Committee, and I should advise my hon. Friend the Under-Secretary that I have in mind one or two amendments affecting the inner cities.

There has been controversy over the minority report. I agree with most of the philosophy of that report which wants a fraternal rather than a paternal approach. Nevertheless, the Government have been right to go ahead on the basis of the majority report. If they had not done so, there would have been the feeling which was expressed by my old friend the late Hugh Gaitskell when he accused the co-operative movement in 1958 of wanting to "defer, defer and defer" rather than reach a practical decision.

The Bill offers a constitution which is practical and workable. It is modest and it will make a modest start, but it is not as modest as the Rochdale Pioneers, a group of working men from the Lancashire mills who on 21st December 1844 got together after work and were able to count 5s. 4½d. in the till as a result of the sale of candles and sugar. A rich flowering of new co-operatives can usher in social and economic changes that will be as significant in the next century, as the Rochdale development was in the last century. From those appointed, I believe that we must look to practical work which will be adventurous and imaginative with vision of the future that could make the Bill one of the most important, small though it may be, of this Parliament.

9.52 p.m.

Mr. Stanley Newens (Harlow)

I wish to welcome the Bill. As president of the London Co-operative Society and a member of the central executive of the Cooperative Union, I ought to declare an interest, but I assure the House that that interest is based on a passionate conviction of the validity of co-operative ideals and their relevance in the present economic climate.

In Britain we are more familiar with the retail-oriented consumer-owned societies, and with the CWS, which are deeply established in distribution. It is important to remember, however, that the co-operative pioneers were equally concerned with co-operative production. According to evidence given to the Royal Commission on Labour in October 1892, there were at that time 150 co-operative productive societies with more than 25,000 members and with sales in the previous year 1891 of £2½ million.

At different times there were co-operative corn mills, cotton factories, woollen mills, boot and shoe factories, iron foundries, collieries, print works and publishing houses, and different societies produced a wide range of products. The birth of workers' co-operatives in recent years, therefore, is not a new phenomenon but a revival of a trend which was well established a century ago. Today, however, it is much more difficult to initiate a private venture or any industrial venture in the current economic climate. It is, in particular, more difficult to launch a co-operative enterprise. Therefore, although the co-operative movement was established on the principles of self help, of which its members are intensely proud, to launch co-operatives today requires help of the sort that only the Co-operative Development Agency could hope effectively to provide. There should be no shame on the part of any co-operative in seeking assistance from the State.

It ill becomes the hon. Member for Rushcliffe (Mr. Clarke) to attack Government assistance to industry. The Agency will be a most modest and inexpensive proposal, particularly bearing in mind that far more money is spent every day to support private industry than the Agency will cost over the full three-year period specified in the Bill. My comments are not in any way intended as criticism of putting large amounts of State money into private enterprises, although it might be much better if some of those enterprises were taken into full public ownership. My comments are designed to put the CDA into perspective.

Co-operative enterprises do not depend upon one entrepreneur. The workers are not left to vegetate until someone comes along prepared to launch a firm that will employ them. The workers can, in fact, do it for themselves and establish a co-operative enterprise. But if the workers are to do this they need assistance of the type which can be offered in present circumstances only by the Co-operative Development Agency.

I myself, in various capacities, have been approached on various occasions by workers who were anxious to establish co-operatives, and it became only too clear to me, over past years, that they would be able to get the sort of advice that they required only if an agency of the sort proposed in the Bill were set up.

Much as I welcome the proposals, I still believe, however, that the real problem in establishing any enterprise is not merely to be met by advice, much as I welcome it. In the last analysis, it is possible to establish a viable enterprise only if one has access to the capital that is necessary to be invested.

I am aware of the many possible sources of funds that the Co-operative Development Agency may be able to advise would-be co-operators to tap. There are those available from the National Enterprise Board. There is the EEC Regional Development Fund. There is job creation money. There are many other sources. But, in the long run, I believe that there is no substitute for an agency which could, in fact, provide financial help in setting up co-operative enterprises from its own resources, and eventually I believe that such an agency, endowed with the necessary funds, is necessary and must, in fact, come.

I hope that the proposals embodied in the Bill will be the first step in that direction. I hope, furthermore, that the Agency will inject a sense of urgency and dynamic into the drive to set up co-operatives, the sort of spirit that will help to convince many people in the community at large of the necessity of travelling further along the road upon which we have embarked and are embarking upon more deeply this evening.

I believe that in this day and age, when workers are so much better educated and less oppressed, job satisfaction and motivation are vital. Co-operation can provide a structure in which the need for that motivation can be met. Co-operative enterprises ought to be accepted as a valid and most important form of industrial democracy. It is true that co-operation is not suitable for the largest enterprises, but in many others it is a far more suitable form of industrial democracy than codetermination or that proposed in Bullock.

Therefore, I hope that the Bill will help to stimulate the growth of co-operatives in Britain, in production, in distribution and in many other fields as well. In the nineteenth century co-operatives were recognised by eminent men across the political spectrum for their worth, and I believe that they should be so recognised today. But, in the long run, I believe that co-operatives have a vital role to play, not only in a mixed economy which is essentially capitalist, such as that in which we live today, but also in a Socialist society which I believe that we should be seeking to create.

I therefore take great pleasure in welcoming the Bill and I hope that it will speedily be put on the statute book.

9.59 p.m.

Mr. Ivor Clemitson (Luton, East)

I, too, welcome the Bill. However, I must say that I welcome it rather on the basis of one slice being better than no bread. I have two criticisms and one comment to make.

The first criticism is as to the method of selection and the constitution of the Agency. We have here yet another body appointed by a Secretary of State. Of course it is easy to do it that way. It has always been done that way, so it follows precedent, but that does not make it necessarily right or desirable. We have more and more appointed bodies, more and more patronage seeping further into the fabric of our society. Surely—

It being Ten o'clock, the debate stood adjourned.

Ordered, That, at this day's sitting, the motion relating to the Co-operative Development Agency Bill may be proceeded with, though opposed, until any hour.—[Mr. Graham.]

Question again proposed, That the Bill be now read a Second time.

Mr. Clemitson

Surely there are other ways. Surely we do not have to follow precedent slavishly. If ever there was a time to try something new, it was in the setting up of an agency like this. Surely it is in the very nature of co-operation to be concerned with democracy, not patronage. People will talk reasonably and rightly about the difficulties—for example, of balancing the giant retail concerns with the relative pygmies of the producer co-operatives and common ownership schemes. But I believe that the minority were right to stick out against the patronage concept. I supported them and encouraged them to do so. They were conciliatory and came up with a compromise. I hope that in Committee the position of the Agency will be reconsidered.

My second criticism is this. The Explanatory Memorandum says that the Bill … gives effect to the majority report of the Working Group on a Co-operative Development Agency". That sounds fine, but the terms of reference of that group were very restrictive. The Agency was to be, and under the Bill will be, purely consultative and advisory. That is not unimportant, and I welcome the Agency being set up, but it is an emasculated version of what some of us originally hoped.

Every day, millions of pounds are disbursed to private industry. If only a fraction of that money could be devoted to the development of co-operatives it would have a dramatic effect. Imagine if producers' co-operatives had a share of manufacturing output similar, for example, to the share that retail co-operatives have of retail turnover. The situation would be very different.

I know that the problems are not related only to availability of capital—there are problems of managerial and professional expertise, too—but we should think big about co-operatives. They should become a large and significant sector of our economy. That will not happen unless we are prepared to devote resources, thinking and energies to that end. Of course we do not want lame ducks, but co-operatives are qualitatively different from private enterprise. I hope that the Agency in this form will be merely a first step down a long road and not an end in itself.

My brief comment is that I believe that it is of the essence of co-operation that power should be diffused and not concentrated, that initiative and enterprise well up from below. It is essential that the Agency shall not become a centralised bureaucratic body.

Some of us have tried to write into the Inner Urban Areas Bill a clause about local co-operative development agencies. I believe that we need that kind of local initiative. We should have not outposts of some central national body but local initiative coming up from below. Co-operation must be worked out at a local level. I urge on the Co-operative Development Agency that it should see itself very much as an enabler and encourager of local initiative, and not in any way as some kind of empire builder from the centre or from the top.

All the speakers, at least from the Labour Benches, have spelt out the virtues of the co-operative idea and the co-operative form of organisation, and I have no need to repeat what they said. All I would say is that co-operation is a peculiarly appropriate way of avoiding the dangers of centralism and the concentration of State power, to which I think we are all opposed, at the same time as releasing the energies and talents of people and fully involving them in control over their own lives and their own livelihoods.

The Bill is a very small start. We should regard it not as the end of the matter but very much as part of the beginning.

10.7 p.m.

Mr. Jim Craigen (Glasgow, Maryhill)

The idea of a Co-operative Development Agency has been the brainchild of the co-operative movement. However, the Agency as proposed in the Bill will not be the property of the co-operative movement, because it has a job to do, and a job for which it will be publicly accountable.

Together with my colleagues in the co-operative parliamentary group, I welcome the introduction of the Bill. It is a small measure, certainly less ambitious than that which we foresaw in the early 1970s, but none the less it is one which will, I feel, make a useful contribution. It is one not wedded to the traditional retail co-operatives but is meant to open up new horizons in the development of co-operative enterprises.

I have two general observations to make on the Bill. The first concerns the employment factor. We all hope that more employment opportunities will be made available as a result of co-operative enterprise. None the less, we have to see the co-operative sector in perspective. At the moment, it provides employment for a little less than 1 per cent. of the working community, as against 70 per cent. working in private industry or the 29 per cent. engaged in various forms of activity in the public sector.

I hope that the Minister will assure us that co-operative enterprises applying for Government assistance under existing aid-to-industry schemes will be treated in the same way as any other firm or organisation seeking such assistance from the State. I have no doubt that the CDA will facilitate new employment opportunities, but it seems to me, bearing in mind the resources at the disposal of the Agency, that we shall depend a great deal on the skill with which the Agency operates as a body.

I trust that there will be a Scottish presence for the Agency. Last summer the Scottish Co-operative Development Committee got off the ground, thanks to some assistance through the Industrial Common Ownership Act 1976, for which my hon. Friend the Member for Consett (Mr. Watkins) must take great credit. I know that the Minister was very sympathetic to the work of the Scottish Cooperative Development Committee. I should like to think that this body, which has now appointed a development officer, will be able to provide some practical assistance and advice to prospective co-operative enterprises in Scotland and that it might well serve as the embryo for some CDA activities north of the Tweed.

The second area I want to deal with relates to the management consultancy role of the CDA. Like my hon. Friend the Member for Luton, East (Mr. Clemitson), I do not want to see a settled bureaucracy. I want to see an active task force in the CDA, one that is able to offer what is so often lacking to people who are interesting in setting up a co-operative—professional, sympathetic advice on legal and financial matters, taxation questions, product viability and marketing skills and questions of personnel and training.

Mention has been made about the personality of the chairman and the members of the Agency. I would not for one moment underestimate the importance of that. I would, however, stress the importance of the calibre and imagination of the person appointed as chief executive and the team that he gathers around him, in being able to deploy the various professional skills that I have mentioned.

The Agency will be identifying, promoting and encouraging co-operatives. Frankly, I would have been happier had there been some reference to assistance with regard to risk capital. That represents a special problem for co-operatives. Very often, when prospective groups go to financial institutions, they are faced with the problem of the mortgage and the fact that if the institution is to invest it may well look for an equity stake or, indeed, a seat on the board. These are obstacles which pose difficulties when one is dealing with a co-operative enterprise where one has the very basis of fixed share capital, non-transferable shares and fixed interest.

I hope that the Government will look again at the possibility of introducing a scheme whereby the CDA can guarantee loans made by financial institutions to co-operatives or prospective co-operatives. I should like to see the Co-operative Bank become involved in this area.

There are two small points that I wish to mention about the functions of the CDA, which, I think, are wide enough. However, I hope that the question of the CDA acting as a forum will not mean that we have merely a big talking shop. Secondly, in undertaking studies and research I hope that we shall not simply have the CDA used as a means of giving pocket money to sociologists to produce histories of co-operatives.

The Bill provides a small wedge in opening up co-operative enterprise opportunities. I hope that it will open them up in away which will extent the concept of co-operatives beyond the traditional confines. An affirmative resolution is proposed in Clause 4(3). I would have preferred the Bill without that affirmative resolution, because I fear that the Agency in its first three years may become too preoccupied with what comes after 1981 and when the three-year funding period runs out.

10.14 p.m.

Mr. Geraint Howells (Cardigan)

When I came into the Chamber about half-an-hour ago, I had no intention of speaking in this debate, because I am in favour of the Bill. I came in only to listen to my colleague, the right hon. Member for Orkney and Shetland (Mr. Grimond). I thought that he made a persuasive case for the Bill when supporting it on behalf of the Liberal Party. However, after listening to one or two hon. Members, I should like to clarify one or two matters.

I was surprised to hear the hon. Member for Aberdare (Mr. Evans) speak of the "failure" of private enterprise. I live in a constituency where we are dependent on private enterprise. Perhaps he is not aware that 31 per cent. of the people in my constituency are self-employed and that small firms play a major role in Cardiganshire and many other parts of the country.

We need a mixed economy. I believe in co-operation, and I believe in private enterprise. The hon. Member for Aberdare also said that agriculture should look at the co-operative movement in Sweden. Many of our counterparts in other countries, and perhaps even in Sweden, should look at Wales where we have a co-operative movement within agriculture. The Welsh Agricultural Organisation Society has done excellent work for 20 or 30 years and the majority of farmers buy their products through the co-operative movement.

I make a plea to Labour Members who are in favour of the co-operative movement, which I, too, favour. We must look after private enterprise, too. It would be a sad day for Britain if private enterprise and small firms ceased to exist. Small firms are the backbone of our community life in rural areas.

The agreement between the Government and the Liberal Party has done much good for small firms and has helped many to become viable once again. The pact has done a power of good for them.

I ask the Minister one question. If we have a Welsh Assembly established in Cardiff, does he envisage that we shall have an Agency such as is proposed in the Bill being looked after by Welsh people in Wales?

10.18 p.m.

Mr. Tom Litterick (Birmingham, Selly Oak)

In rising to support this Bill enthusiastically I must admit that I experienced a chill when I realised that the Tory Party was supporting it, and an ever greater chill when I realised that it had Liberal support as well. That seemed enough to condemn the poor wee thing to death before it starts.

I refer to the speech of the hon. Member for Cardigan (Mr. Howells). It seems a bit daft to say that one is in favour of the mixed economy. In fact that is about as daft as saying one is in favour of the weather. The hon. Member must be more specific. Does he mean the mixed economy that is the British economy now, or the mixed economy that was the British economy 50 years ago? Or does he mean the mixed economy of Belgium, or that of Yugoslavia, or that of East Germany, or even that of the Soviet Union or China? These are all mixed economies, but they are all very different animals. Perhaps at some other time we can have an interesting debate on what we mean by the term "mixed economy".

This Bill is significant because it seeks to encourage a type of organisation that is a departure from the monolithic Morrisonian public corporation, and also a departure from the monolithic hierarchical private corporation. There are other kinds of business enterprises, but this is aiming at something that is small in scale and run on principles quite different from those dominating the two types of institution that I have just mentioned. They cannot, by their very nature, be dependent on authoritarian governmental systems within them.

It is that aspect that causes much of the alienation on the part of masses of people within modern, highly developed economies. They find themselves in huge organisations with perpendicular, hierarchical authoritarian systems that tell them what to do, when and how, down to the last detail, regulating their lives to the last millisecond, so far as they can. Much of their trouble stem from the fact that flesh and blood human beings resist this kind of regimentation and regulation.

The Bill offers some hope that we can catalyse the development of a qualitatively different kind of organisation within which human beings can lead genuinely human working lives. That is a great advance on working for an organisation as anonymous as, say, ICI or even the gas board. Those organisations have not yet answered the enormous human and social problems posed by their very existence and size. They have not yet done so. It may be that we in the Labour Party offer them some sort of way out of their human impasse through an industrial democracy Act. But since we have seen neither hide nor hair of a White Paper on the subject and nothing approaching a Bill, there is no point in pursuing that subject now, but we might have something to offer them eventually when we can get round to passing such legislation.

Many co-ops have been formed in the past and most have been destroyed. There are very few survivors. They come and they go like May flies, just as small businesses come and go like May flies. I suggest to those of my hon. Friends on the Labour Benches who have a special connection with co-ops—by which we mean the retail co-operative societies—that the only reason the retail co-ops in Britain have survived and flourished is partly the peculiar federal structure of the retail co-operative societies. It is partly because of the technological revolution which overtook the retail trade after the co-ops had been in business for many decades and were deeply embedded in British society, and because they bad the funds and managerial expertise to resist the stress caused by the technical revolution in retailing which happened as recently as the last 30 years.

But other co-operatives were not so fortunate. It is the inevitable tendency of the development of capitalism and modern technology that organisations should grow bigger and bigger. That bigness confers enormous market power, for which Opposition Members seem to have great admiration. That in turn makes it an absolute certainty that small businesses cannot survive in those market conditions. They are market systems, but they are systems which become progressively more monopolistic and able to prevent the entry of new and possible competitors. That is an unmistakable characteristic of our type of system.

We must remember that the real purpose of the Bill is to encourage the development of a particular kind of small business. Opposition Members are for ever saying that small businesses should be given special consideration. What they mean is small businesses owned and controlled in a personal proprietorial sense. We are not talking of that kind of small business. This Bill refers to a special kind of small business.

I hope that the Conservative Party, in giving such support as it has given to the Bill, will at least acknowledge that it is small businesses about which we are primarily talking. Intead of giving the Bill the tepid support which they have offered—support which has been heavily qualified—the Tories should offer enthusiastic support aiming at what for many could be a salvation from the totalitarian characteristics of the large organisations that dominate our economic system. Those organisations are essentially totalitarian and most human beings do not like to spend their working lives in such organisations because they are totalitarian.

I agree with my hon. Friend the Member for Luton, East (Mr. Clemitson) that the method by which agency personnel will be appointed as described in the Bill should be only temporary. It is unfortunate that, willy-nilly, we are setting up yet another group that will be the subject of ministerial patronage. I understand that in the initial stages it may be necessary to rely on unilateral appointments by a Secretary of State, but I hope that within the three to five years specified in the Bill we can gradually move away from that. I hope that the Bill will be amended to indicate the possibility that appointments to the Agency will not indefinitely be within the sole bailiwick of the Secretary of State, because this can encourage a sort of authoritarianism and bureaucracy that would be unfortunate.

Clause 3 will have to be closely scrutinised in Committee. The number of things that the Agency will not be allowed to do depressingly prefigures its long-term character. I hope that we shall be able constructively to discuss in Committee how the clause can be positively modified.

I hope that the fears expressed by the hon. Member for Rushcliffe (Mr. Clarke) about the future of the Agency will be fully justified. I hope that it will be endowed with financial strength to act autonomously as a financier of small co-operators when they are at their most vulnerable stage of getting off the ground, and I hope that the Agency will become a permanent economic institution in the fabric of our society.

10.28 p.m.

Mr. Arthur Palmer (Bristol, North-East)

I intend at this time of night to be extremely brief. Like every other hon. Member, at least on this side of the House, as an active political co-operator all my life, I welcome the Bill.

If I were asked to define co-operation, I would say that it is Socialism without the State. The hon. Member for Rushcliffe (Mr. Clarke) seemed to regard it as an eccentric form of private enterprise, but that is a perverse sort of reasoning.

Consumer and producer co-operation flourishes in strong free enterprise economies, including the United States, in the Communist economies of Eastern Europe, and in the mixed economies, which is a useful if vague way of describing the economic organisation that we now have in Western Europe, including Scandinavia, France and this country. Co-operation is a universal principle crossing frontiers and transcending ideology.

It is interesting however, to note that, although British co-operation has had a very long life, having been founded early in the nineteenth century, our Governments in the twentieth century have tended to take a somewhat negative attitude towards co-operation. Indeed, some Governments of recent times have gone further and taken an almost punitive attitude to it, particularly as regards taxation. One of the outstanding advantages of this legislation is that it at last breaks the sterile tradition of negativism shown by British Governments towards co-operation.

The Bill takes a positive and encouraging attitude towards co-operation in all its forms and, just as important, it will I think, preserve the cherished independence of the co-operative movement from the State, which has always been valued by British co-operators.

10.30 p.m.

Mr. Peter Bottomley (Woolwich, West)

I take up one remark made by the hon. Member for Bristol, North-East (Mr. Palmer). To talk of co-operatives being Socialism without the State seems to be a rather curious way of describing the act of co-operation. I would describe it as an act of sharing without Socialism.

Mr. Palmer

I suggest that a rose by any other name would smell as sweet.

Mr. Bottomley

I turn to the remarks of the hon. Member for Birmingham, Selly Oak (Mr. Litterick). The hon. Gentleman seems to be popping in and out of the Chamber. I regret that he is not present to hear my remarks on his remarks. He did his best to distort, delude and possibly to entertain the House by suggesting that China, East Germany and the Soviet Union are not Socialist States. He described all three as having mixed economies. I suppose that it can be argued that if a farmer, or farm-worker, in Russia is allowed to spend 3 per cent. of his time working on 3 per cent. of the land producing half the agricultural production of that country, there is a mixed economy. However, that demonstrates that private enterprise works better than State Socialism, or even enforced collectivism.

The hon. Member for Selly Oak has done a disservice to the cause of co-operation by claiming that co-operation is Socialism in practice when the hon. Gentleman and some of his colleagues spend most of their time trying to force a totally different sort of State Socialism—namely, collective, centralised nationalisation—on more industries rather than putting their principles into practice as expressed this evening, when they should be arguing that the present centralised State monopolies, the nationalised industries, should be returned both to those who work in them, giving them the freedom to dispose of their shares in them if they feel that to work as a worker co-operative is not the most efficient system.

Mr. Newens

Is the hon. Gentleman not aware that many of us within the Labour Party have for years been advocates of what we have described as worker control, or industrial democracy, one of the objectives of which is precisely to democratise the State-owned monoliths? We recognise many of the faults that are attached to those organisations. We do not want them to remain in their present form.

Mr. Bottomley

I congratulate the hon. Gentleman on his ineffectiveness. For example, as regards the British Steel Corporation, we were told that having worker directors would be the answer. We are told 10 years afterwards that that has made no difference or very little difference. The hon. Gentleman must have made considerable efforts to persuade his party and the Government to implement worker control of the nationalisation of the shipbuilding and airframe industries. There has been no sign of that. I only wish that the hon. Gentleman's efforts to force other forms of Socialism down the throats of the country were as ineffective as his efforts have unfortunately been in tackling his party's desires, evidenced by its actions, to continue with a form of nationalisation, a form of worker control, which the hon. Gentleman and many of his colleagues have laughed out of court tonight. The trouble is that the rest of the country and those of us in this place are in court and suffering because of that.

Mr. Mike Thomas

One could be forgiven for thinking that the hon. Gentleman was an ardent advocate of industrial democracy. No doubt he will tell us all about it and how much he is in favour of it.

Mr. Bottomley

I am grateful to the hon. Gentleman. I was about to turn to the remarks of his hon. Friend the Under-Secretary of State and to inquire why the gratuitious insults involving Select Committees were introduced.

Mr. Russell Kerr (Feltham and Heston)

Get on with it.

Mr. Bottomley

Does the hon. Gentleman wish to intervene? If he does not, I shall be grateful if he will agree to keep quiet. The Under-Secretary of State has chosen to introduce notes of controversy where none exists. As the Bill is drafted, there are few areas of controversy. [HON. MEMBERS: "Then sit down".] I hope that Labour Members below the Gangway will contain themselves. This is no laughing matter. Those who work, or would like to work, in cooperatives would prefer to see Labour Members paying rather more attention to other hon. Members. I did not sit in my place laughing at Labour Members' contributions, even though some of them were as laughable as the contribution of the hon. Member for Selly Oak.

There is no reason to bring political controversy into a Bill that is politically non-controversial. Similarly, if a Select Committee produces a unanimous report, there is no need to take the view that political controversy must be introduced. Why should that be done when others happen to find common ground?

I recognise that the Bill is built on the report of the working party. There is a part of the minority report that demonstrates the point that I am trying to make—namely, the need to keep Socialism out of co-operative enterprises. The minority report, in page 2, paragraph 2.3, states: Membership of a co-operative society should be voluntary … without … political … discrimination, to all persons who … are willing to accept the responsibilities of membership. Drawing a quick parallel with trade unions, I think that many more people would be willing to join trade unions if membership were voluntary and there were not discrimination, the only test being whether people were willing to accept the responsibilities of membership. Too often we have seen enforced Socialism wreck ordinary, decent, useful voluntary bodies. I hope that future c-operative organisations do not feel that they have to follow the line put forward by some Labour Members: that Socialism must be tacked on as a useless or interfering appendage to every kind of organisation.

I support the comments of the hon. Member for Cardigan (Mr. Howells) about the importance of private enterprise. I think that private enterprise within a co-operative framework is an important part of the spectrum of business organisation, and it ought to get a fair wind. I do not believe that that fair wind should be extended to giving the kind of subsidy which, on a continuing basis in a competitive industry, would force others out of business.

I have had experience in a small engineering company of competing with other firms which have been heavily subsidised for a number of years. I know how difficult it is for people in a competitive industry to compete with those who have a bottomless pit of funds available to them.

Perhaps when the Minister replies to the debate he will give the sums per employee that have been sunk in some of the producer co-operatives that he mentioned. He may argue that these are of no relevance to the Bill, and I think that he would be right. In that case, I ask that his hon. Friends should desist from trying to turn the Co-operative Development Agency into a source of finance for non-competitve products. I believe that, if we are to have a spectrum of business organisation in this country, the financial rules should be basically the same for all so that the customer gets the best choice without having to subsidise uncompetitive products through the taxes that he pays.

There is another point in the report to which I should like to draw the attention of the House. In pages 14 and 15, paragraph 50, talking among other things about the balance within the Co-operative Development Agency of large members of the movement, such as the retail co-operatives and the newer smaller producer co-operatives, the report states that no matter what self-denying ordinance it might offer to observe, it would be unrealistic to suppose that there would not be occasions when it "— the large part of the movement— would assert the power of the purse in ways which other sections of the Movement would dislike or even mistrust". I think that those are very wise words. They precisely describe what is happening in the Labour movement at the moment. All the constituency parties put together are outvoted and outgunned by trade unions which contain many members whose political objects have nothing to do with the kind of decisions forced on the Labour movement as a whole. Perhaps I am putting in a quiet wish that the Labour movement could be appointed by a non-Socialist Secretary of State so that we could get away from all the horrors of Socialism as we have seen them in the last few years.

The next point that I want to make—I recognise that the hour is getting late—is the hope that co-operation and co-operative enterprises will come not only from the private sector but from parts of the existing public sector. It seems that a number of functions carried out by local authorities and their employees could equally well be carried out by co-operative enterprises. I leave out public works, which deal with the construction industry, because that would introduce an unnecessarily controversial note. But parts of refuse collection, hospital laundries and other areas which are not fundamental to the main public service involved could be carried out more effectively and economically by co-operative enterprises as well as giving more satisfaction to the people employed. Alienation comes within not only large private firms, but, as the hon. Member for Selly Oak said, nationalised industries and public enterprises.

Mr. Litterick

As the hon. Member for Selly Oak said.

Mr. Bottomley

I am grateful to the hon. Gentleman for coming back and making that interjection. He has just repeated what I said. As the Minister has so wisely summed up the debate from a sedentary position, if I conclude my speech, he will be able to do so from an upright position.

My last comment is about taxation. A number of difficulties arise in the transfer of the ownership of an enterprise from a proprietor, or a group of proprietors, to the employees involved. I am not suggesting that every proprietor should transfer his business to his employees. I recognise that a number would like to be able to do that. Unfortunately, some of the tax avoidance legislation, or anti-avoidance legislation, makes it difficult for someone who owns a fair amount of capital to give it to his employees, or allow it to be transferred to his employees, without a heavy tax penalty.

Mr. Clemitson

Did I hear the hon. Gentleman say that if the owner of a business wished to transfer the ownership of that business to the employees, there was a heavy tax penalty? If that is what he said, it is untrue, because two sections of the Finance Act 1976 specifically provide for that eventuality and exempt the transfer from capital transfer tax and capital gains tax.

Mr. Bottomley

My words described both the transfer and allowing employees to earn the ownership of the business. My understanding is that it a proprietor wants to allow employees to take capital in the business at an accelerated rate, that is caught by some of the regulations of the Inland Revenue on share option schemes. I am talking not about the kind of share option schemes that ICI uses, but about the kind that might transfer the majority or the whole of the ownership of the business to the employees over a relatively short period.

I believe that the CDA can wisely look at the impact of taxation on these arrangements as well as, I hope, looking forward to co-operative enterprises not just of common ownership where each worker in the enterprise owns the same share but going on to develop a range of co-operative organisations where people can move into one form of organisation and, if they desire, move out of it again, and not just establishing static co-operative organisations.

10.43 p.m.

Mr. Cryer

This has been a very interesting and, indeed, almost inspiring debate because of some of the remarks from this side of the House. It is significant that the debate has been dominated by Labour Members putting forward ideas and constructive suggestions for the Bill. I have no doubt that there are occasions when it is possible—just—that Government Members standing at the Dispatch Box find putting forward a point of view slightly dispiriting, but I am certain that tonight is not one of those occasions, and I am indeed fortunate to have been able to move the Second Reading of the Bill and now to wind up the debate.

The hon. Member for Rushcliffe (Mr. Clarke) grotesquely suggested that co-operatives are a form of private enterprise. We on this side of the House entirely reject that view. We argue that co-operation is a form of endeavour which rejects the internal competitive hierarchical philosophy of private enterprise. We regard co-operation as a joint endeavour of equals, and that is one of the important qualitative differences between the co-operative structure and the structure of much of private enterprise.

Indeed, I rather thought that by his intemperate attack on Meriden and KME the hon. Gentleman demonstrated the Conservative insincerity on this matter. These co-operatives were established only because of what a previous Tory Prime Minister called the unacceptable face of capitalism, when a number of jobs were placed at risk.

As the working party clearly demonstrated, and as I explained quite clearly, we naturally prefer not to form co-operatives in such a crisis situation. But often people look to a co-operative as the only solution when a decision has been made in the boardroom and when they have not been consulted about such a decision to end their working lives and throw them on the dole queue. Naturally, working men and women seek some alternative and in some situations they happen to alight on a co-operative alternative.

But, of course, the Government, the Labour movement and my hon. Friends present tonight have made the point emphatically that they would prefer to see co-operatives established in favourable circumstances and favourable conditions. Clearly, where because of certain circumstances jobs are at risk or have been brought to an end, they are not the most favourable circumstances.

To suggest that Meriden and KME, because of the unfavourable circumstances in which they started, were wrong to start is to do them a great disservice. As I pointed out in an intervention, such wanton attacks could cause severe difficulties for Meriden and KME.

I should like to record that the notion that jobs were lost elsewhere because two co-operatives were started is demonstrably wrong. Certainly it was not the men at Meriden who made the decision at NVT to opt out of the small motor cycle market that was the growth area. Certainly it was not the men at Meriden who made the decision to opt for one model which was overpriced for the American market and could not sustain production.

It is extremely unfair to be so critical of the people in both those co-operatives, where an important number of jobs have been maintained. They have shown initiative and endeavour. They have shown that working men and women, albeit with the help of management expertise, can succeed. Why the hon. Member for Rushcliffe should imply that co-operatives would want to dispense with management expertise is beyond me. Working men and women involved in the co-operatives have demonstrated that relatively complex technological processes can be achieved in co-operative form and endeavour. That surely is worth while.

I am concerned about the way in which the Opposition run down sections of industry in a way that suggests that, for example, they do not want to see KME sell radiators, as I mentioned in an intervention it is doing in Birmingham now, and that they do not want to see the Triumph Bonneville motor cycle, the last in any serious quantity production in this country, sold all over the world. That is surely what all hon. Members want to see—British products sold in the exports markets of the world. This sort of critical demonstration is clearly designed only to inhibit that sort of success.

The hon. Gentleman asked for details of the financial circumstances of the two co-operatives. These are available from the usual sources published by the respective organisations. When, for instance. KME or Meriden applies for assistance, the matter will either be brought before the House in the usual way or any application will be treated with the confidentiality with which any application by any organisation is treated.

Indeed, the hon. Gentleman's request for publicity and information about these two co-operatives is in stark contrast to the Conservative Party's view when it was in office and passed the 1972 Industry Act, because all the payments under that Act were virtually made in secret. They were not published. It was not until this Government came into office that in July 1974 we agreed to publish in Trade and Industry details of grants that had been made. But the applications still retain an element of confidentiality and the Department naturally recognises that confidentiality.

Mr. Kenneth Clarke

Will the Minister confirm that under the Industry Act 1972 there is provision for a report of the Industrial Development Advisory Board to be made public when that board has advised the Government that it is not a commercially sound proposition to invest in an organisation such as Meriden or Kirkby, and that that report may be laid before Parliament? Will he confirm that such reports have been kept confidential and that requests for them were refused in the case of the advice the Government received about Meriden and Kirkby, that it was not justified to spend large sums of taxpayers' money in supporting non-commercially viable organisations?

Mr. Cryer

Reports are confidential to Ministers but if IDAB chooses it can draw a particular decision to the attention of the House. This is a matter for IDAB and not for the Minister. The hon. Member for Rushcliffe attacks co-operatives but never mentions the amount of money given to support private enterprise, amounts which many Conservative Members seek to gain from the Department of Industry. He never pointed out, for example, that in 1976–77 private enterprise received over £700 million in regional preferential expenditure. He did not mention that private enterprise receives about £2½, billion per annum in tax concessions on investment in plant and machinery.

Naturally, we want private enterprise to invest and we give these incentives to provide an encouraging framework It is grossly unfair to attack two relatively tiny organisations and ignore that a large and significant sector of private enterprise is receiving support from the Government.

The hon. Member did not mention the £5 million loan to Brentford Nylons, a private enterprise company. He made no mention of Courtaulds at Skelmersdale, which received over £5 million in loan and grant aid from the Government and closed down the factory at Skelmersdale. A section of that money is to be paid back but not all of it is recoverable. When one criticises support from the taxpayer one must mention both if one has a balanced judgment rather than pure, doctrinaire political prejudice.

Mr. Peter Bottomley

I presume that the first two categories are available to co-operatives as to any other organisation. I hope that the Minister will confirm that. When other funds are made available to private enterprise or to other forms of private enterprise—I refuse to accept that a co-operative is necessarily a Socialist enterprise—is it made available when there has been a recommendation from an independent body that the money will be lost or when it is in great danger of being lost, or it is made available when the company has been able to demonstrate that it will have a viable future?

Mr. Cryer

The board recommends to the Minister and its recommendations are varied. The Minister takes into account the recommendation, whether it involves a co-operative form of endeavour or a private enterprise endeavour. The hon. Member for Rushcliffe also mentioned Mondragon and brought into relevance what he regarded as incentives. We have said that we regard co-operation as a significantly different form of endeavour. It is a joining together of equals in whatever type of endeavour it is. Far from the picture which the hon. Member for Rushcliffe drew of close parallels with private enterprise with incentives for those involved, the range of salaries within the Mondragon co-operative enterprise is relatively small. The managerial and professional members of the Mondragon co-op receive salaries below the comparable levels for similar jobs outside. That suggests that people are not motivated by gain alone and that some people are committed to ideals and to working for their fellow men. The notion of the hon. Member for Rushcliffe that people are motivated only by financial gain does not fit in with co-operative ideals.

Mr. Kenneth Clarke

I have tried to resist the temptation to intervene, but, because of the sustained attack on me, I am grateful for the opportunity to intervene again. Does the Minister accept that no one is suggesting that anybody is motivated by gain alone, but that incentive is an important part of any industrial enterprise? I believe that in Mondragon the proportion of wages and salaries varies between three to one between the lowest and the highest. That is in stark contrast to the Meriden co-operative, which the Government supported. This began on the proposition that everybody in the organisation should be paid the same, that there was no need to bring in anybody from outside with management expertise or experience of management. But both those crack-pot proposition were abandoned after about two years of spending large sums of the taxpayers' money.

Mr. Cryer

The hon. Member for Rushcliffe made one vaguely correct statement in which he said that there was a particular range of salaries at Mon-dragon and that at Meriden there was a single salary level. My information is that that common level has been retained for all the employees, although there have been discussions on a production bonus which would be shared equally.

During the life of the co-operative at least one person has received a significantly greater sum than the co-operators. The co-op has subsequently brought in management experts who receive higher salaries. But the important element is that the decision was not imposed by some distant boardroom or a group of people who had not consulted the work people. The decision was made by the co-operators themselves, as I assume the decision was made at Mon-dragon and at Scott Bader, that there should be a ratio of bottom to top salaries. The notion that the hon. Member for Rushcliffe puts forward, that parity of pay has been discarded by all except Meriden, is not true. In many co-operative endeavours there is a move to narrow the range of salaries. My understanding is that that is a specific and conscious desire on the part of the industrial common ownership enterprise at Scott Bader.

The right hon. Member for Orkney and Shetland (Mr. Grimond) said that we should consider after three years the need for the Agency. There will be an annual report to the Secretary of State and that will be laid before Parliament. I hope that time will be given to debate this important report. Often we do not devote enough time to the reports that are laid before Parliament—the NEB report and so on. The progress of the Agency can be measured and hon. Members can say how they think the Agency should develop in the light of the report. That is an important democratic scrutiny.

My hon. Friend the Member for Brent, South (Mr. Pavitt) and others referred to the minority report. I said in all innocence that the report was a reflection of the diversity of view that helped to strengthen the report. My hon. Friend said quite rightly that attempts to resolve these views would have delayed publication of the report and that would have meant that this debate would not have been taking place tonight. I am sure that all my hon. Friends feel that it was vital that the Bill should be brought before the House. It has been a long struggle to get the Bill here. It is an important first step.

My hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) asked for a specific assurance that co-ops would be treated the same as private enterprise applicants. They are treated in exactly the same way in respect of applications under the Industry Act 1972. Indeed, what I hope the CDA will do is to enable groups of people who lack the necessary management, accounting and marketing expertise to prepare full and proper forecasts, which the Department of Industry requires in order to make a proper judgment, to have that lack of expertise made up by the CDA, so putting them on a parity with many of the private enterprise organisations that can present their case because they already employ that sort of expertise. I draw my hon. Friend's attention to the case that I mentioned earlier, in which a co-operative venture failed because it got into the wrong hands, was unable to present forecasts and was dependent purely on a group of people who did not have its best interests at heart.

The hon. Member for Cardigan (Mr. Howells) welcomed the Bill. He believes in a mixed economy. So do we all, I am sure. The only question is just what sort of mixture should be defined. The hon. Member will know that we can never precisely define the mixture of a mixed economy—otherwise, the Conservative Government could never have nationalised Rolls-Royce in 1971 and destroyed that particular margin.

The hon. Member also mentioned small firms. I am grateful for his comments. He agrees that the Labour Government have consistently endeavoured to encourage small firms. He raised the point about any specific devolution of the CDA to any region. That will be a matter for the CDA. However, we want to keep the organisation relatively simple, free and unbureaucratic, and consequently it would have to take those factors into account when deciding whether to spread out to any particular region, such as Wales, Merseyside, or wherever.

Finally, in contrast with the vicious and vindictive attacks by the Opposition spokesman, my hon. Friends, in all their speeches, were quite clearly motivated by idealism. They clearly believe that people should work together, not against each other. Co-operation seeks to emphasise the positive relationships of help and good will that frequently motivate mankind. My hon. Friends were right to reject the selfish, greedy society so vividly portrayed by one of the two Tory spokesmen present tonight.

We believe that the CDA is a symbol of Socialist idealism, an ideal cherished by the Labour, co-operative and trade union movements. We hope that this Agency will help society to move towards that ideal.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40(Committal of Bills.)

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1. CO-OPERATIVE DEVELOPMENT AGENCY (MONEY) 80 words